Lyxor launches risk-weighted indices
Lyxor Asset Management has launched SmartIX Equally-weighted Risk Contribution (ERC) Equity Indices, a new range of risk-weighted indices aiming to prevent risk concentration and improve diversification.
The range will initially include five indices at launch offering exposure to developed equity markets although Lyxor is planning on extending the range soon.
The company said the recent behavior of equity markets had reinforced the need to create a more efficient and less volatile alternative to traditional market-cap weighted indices.
To avoid the risk of overweighting the volatile large-cap stocks, the SmartIX ERC Equity Indices will apply Lyxor’s proprietary method to equalise the risk contribution of each large cap component in the underlying index.
Because small and mid-cap stocks will remain cap-weighted, Lyxor expects the SmartIX indices to provide the same investment capacity as traditional indices.
As of 30 September 2011, Lyxor manages more than $800 million in assets using the ERC method.
The SmartIX indices will be independently calculated by index specialist FTSE.